Terminating a lease — what not to do
A landlord communicating to a tenant a termination of a lease must be clear. This is evident from the decision in Dee-Tech Pty Ltd v Neddam Holdings Pty Ltd  NSWCA.
The terms provide for the right
A lease will generally provide for the circumstances where a landlord is entitled to exercise its contractual right to terminate a lease. The relevant termination may be by re-entry or notice of breach to the tenant of an essential term.
Except in the case of non payment of rent, the landlord must comply with the provisions of section 129 of the Conveyancing Act 1919 (NSW) in order for the termination to be effective.
In order for a notice of termination of a lease to be valid, the notice must make a clear demand for possession. This means that the notice to terminate a lease must include an unequivocal act or statement that the landlord is treating the lease as at an end.
The Dee-Tech case demonstrates a bad example of a notice to terminate.
In the Dee-Tech case, the agent for the landlord served on the tenant what was unsuccessfully argued as an effective notice to terminate the lease.
The right for the landlord to terminate the lease arose because the tenant did not maintain the relevant insurances under the lease and maintenance of insurance by the tenant was an essential term of the lease. A breach of this term of the lease meant that the landlord could terminate the lease subject to the observance of section 129.
The notice headed “Notice to vacate the premises” in the Dee-Tech case included, amongst other things, that:
“You are in breach of your lease and we have been instructed to terminate this current lease… You are requested to vacate the premises”.
The Court of Appeal held that the notice was not an unequivocal statement to terminate the lease because:
- the heading failed to describe that the notice was a termination of breach of an essential term;
- the notice did not state that the lease was terminated;
- the notice did not state that the lease would be terminated at a certain time in the future; and
- the notice did not contain any demand for immediate possession of the premises.
In essence, the notice did not contain any demand at all that the tenant yield up possession of the premises. It simply confirmed the “request”.
If the intention of a landlord is to terminate a lease, the lease should be terminated effectively with clear and direct language.
Alternatively, a tenant should not take a notice to terminate given by the landlord on face value and should consider whether the notice actually serves the purpose for which it was given.
In the Dee-Tech case, in the end, because the lease was not validly terminated unbeknown to the landlord, in the same and small window of opportunity, the tenant effectively exercised its option for a further term and the relationship between the landlord and the tenant continued.